The European economy is in bad shape. On May 3 the EU Observer reported:
The eurozone economy will contract by 0.4% in 2013, Economics commissioner Olli Rehn said Friday. Presenting the EU commission’s Spring Economic Forecasts, Rehn said that the bloc would return to growth in 2014 by a slower-than-expected 1.2%. Meanwhile, the average debt levels will hit 96% in 2013.
Looking at the 27 EU member states, things are looking almost as bad: inflation-adjusted GDP growth is forecast to be 0.4 percent this year, though that will probably be adjusted downward in the next few months. EU institutions that publish economic forecasts have a tendency to downgrade their forecasts as the present catches up with the future.
At the same time, total general government debt in the 27 EU countries is heading the other way: from 2010 to 2012 those countries added 1.4 trillion euros to their total debt. In terms of growth rates, EU-27 have added debt at frightening rates over the past few years:
2008: 6.1 percent
2009: 12.8 percent;
2010: 12.3 percent;
2011: 6.7 percent;
2012: 6.7 percent.
Due to an almost total absence of GDP growth, the ratio of debt to current-price GDP has grown at stunning rates:
To reinforce the persistent nature of the economic crisis, the EU Observer also reports:
France has moved centre stage in the crisis, after EU economic affairs commissioner Olli Rehn said that the country would fall into recession in 2013 and needs two more years to bring down its budget deficit. Presenting the Commission’s Spring Economic Forecasts on Friday (3 May), Commissioner Rehn described Paris’s forecasts, based on a mere 0.1 percent growth rate, as “overly optimistic.”
It is hard to see how France has ever been out of the Great Recession. From 2008 through 2012 the French economy averaged 0.06 percent in real GDP growth. During the same period of time its debt-to-GDP ratio went from 68.2 percent to 90.4 percent.
This explains why, as I reported recently, the French government is panicking over the prospect of more austerity. They know it has not worked for their southern neighbors and they are not going to stir up the same kind of political turmoil as those policies did in, e.g., Greece. The socialist French government knows that parties like Front National – often perceived, wrongly so, to be ideologically close to the Greek Nazis, Golden Dawn – as well as radical communists could make significant political gains if the French people were subjected to the same bone-crushing fiscal measures as the Mediterranean EU members have implemented.
The French resistance to more austerity caused the EU Commission recently to declare that the War of Austerity is over. It is not, of course, or else there would be a complete course change throughout southern Europe. Furthermore, the EU Commission would not be continuing to pressure Paris over balancing its budget in the midst of a recession. The EU Observer again:
The eurozone’s second largest economy would run deficits of 3.9 percent in 2013 and 4.2 percent in 2014, he said, calling on Francois Hollande’s government to draw up a “front loaded” package of cuts and labour market reforms to stop “persistent deterioration of French competitiveness.” For its part, Paris maintains that it will reduce its deficit to 2.9 percent in 2014, fractionally below the 3 percent limit in the EU’s Stability and Growth Pact. Hollande in March announced that an additional €20 billion worth of tax rises and €10 billion in spending cuts would be included in his budget plans but said no further cuts would be made.
Because if he tries, the socialist government is going to end up in real trouble. Many of the prime minister’s cabinet members are truly fearful of more austerity, for various reasons.
But wait, there’s more:
Crisis-hit Cyprus, which has now finalised a 10 billion bailout, is set to be worst hit by recession with an 8.7 percent fall in output. Meanwhile, the average national debt pile is expected to peak at 96 percent of GDP in 2014, with six countries – Belgium, Ireland, Greece, Italy, Cyprus and Portugal – having debts larger than their annual economic output. Rehn indicated that Spain would also be given an additional two years to bring its deficit down to the 3 percent threshold, while Slovenia would also need more time.
So long as Europe keeps its welfare state, it has no way out. The welfare state is what is driving Europe’s crisis today, and it will continue to do so for as long as the welfare state exists. Nothing is changing for the better. Europe is drowning in its entitlement-driven government debt. The continent is stuck, and the talk about austerity being over is politically motivated hot air.
I stand my my diagnosis: austerity policies exacerbated the financial crisis into a welfare state crisis and turned Europe into an economic wasteland. What used to be a thriving industrialized continent is now facing an endless future of industrial poverty.
Austerity is spreading its ever darker shadow over Europe. It has now grown to such proportions that it is beginning to really scare members of Europe’s political elite. Among the deeply concerned are members of the French prime minister’s cabinet. This is big news that few seems to notice. One who does, though, is Ambrose Evans-Pritchard, sharp-eyed editor with The Telegraph:
French president Francois Hollande is facing an anti-austerity revolt from his own ministers as he pushes through a fresh round of tax rises and austerity to meet EU deficit targets. Three cabinet members have launched a joint push for a drastic policy change, warning that [spending] cuts have become self-defeating and are driving the country into a recessionary spiral.
And these are no small words coming out of the French cabinet:
“Its high time we opened a debate on these policies, which are leading the EU towards a debacle. If budget measures are killing growth, it is dangerous and absurd,” said industry minister Arnaud Montebourg. “What is the point of fiscal consolidation if the economy goes to the dogs. Budget discipline is one thing, cutting to death is another,” he said.
See I told you so. But where have the French been over the past five years when Greece has been sinking into the dungeon of austerity, mass unemployment, poverty, economic despair and political extremism? What did the French do to help Spain avoid bone-crushing austerity that has turned middle-class Spaniards into food scavengers? Did a single leading French socialist lift as much as an eyebrow when Portugal was almost torn apart by social unrest following EU-imposed austerity?
Evans-Pritchard does not bring up this European context, but his analysis of the French socialist austerity revolt is nevertheless worth listening to:
Mr Hollande will on Wednesday unveil another round of belt-tightening worth €12bn, even though Paris is already carrying out the harshest fiscal squeeze since the Second World War and France may already be in a triple-dip recession. The cuts are hard to reconcile with Mr Hollande’s campaign pledge last year to end austerity. They have set off furious criticism across the French Left. “Austerity is no longer tenable in Europe today with millions of unemployed,” said social economy minister Benoît Hamon.
So Mr. Hollande has shifted foot. His original plan was to “end austerity” by having government spend more, not less, while still raising taxes through the roof. That alternative does about as much damage down the road as austerity, especially if at the same time you are trying to balance the government budget.
And at the end of the day, the balanced budget is all that matters. It is the pillar upon which Germany has built its unrelenting campaign against “undisciplined” euro-zone members. The doctrine of the balanced budget was one of the cornerstones of the EU constitution – originally turned into constitutional mandate in Article 104c of the Maastricht Treaty of 1992 – and has since been elevated to religious doctrine. No one in Europe questions the economic logic in, so to speak, putting the balanced budget before the horse.
Not even the French who break ranks with the austerity-touting consensus. However, they actually don’t have to, because the nature of the austerity measures is such that it really does not deviate much from the standard European doctrine of maxing out the size of government:
Almost all the austerity measures will come from tax rises, pension fees and a “green’ levy, rather than spending cuts. The state sector will climb to a record 56.9pc of GDP this year as the economic contraction eats into the private sector. Public spending has reached Scandinavian levels … Critics say the French tax squeeze is not even helping to curb borrowing. France is at growing risk of a debt trap as the slump itself erodes tax revenues. Public debt will jump to 94pc of GDP next year, a drastic upward revision from 90.5pc.
Spending cuts would have made no real difference. Look at Greece, Portugal, Spain and Cyprus. The problem is the over-arching focus on balancing the budget in a recession.
Evidently, as Evans-Pritchard reports, the bad shape of the European economy, after years of unrelenting spending cuts and tax increases, is so bad that the political elite is beginning to panic:
A report prepared for EMU finance ministers over the weekend by the Breugel forum in Brussels said the eurozone’s crisis strategy is a failure, a nexus of confused policies that cut against each other. Fiscal overkill is stopping the banks returning to health, while foot-dragging on the EU bank union is perpetuating the credit crunch in the Club Med bloc. Sky-high unemployment is eroding job skills and “undermining Europe’s long-term growth potential”. Low growth is making it “much tougher for hard-hit economies in southern Europe to recover competititveness and regain control of their public finances”.
This is a good, first look at Europe’s deep structural problems. Austerity is not a structurally oriented policy, but it interacts with a lot of structural features of the European economy that, taken together, conspire to trap the economy in perpetual stagnation. One of those structural features is the system of excessively rigid labor laws. By interfering with the need of businesses to make flexible adjustments of their work force, Europe’s hire-and-fire laws significantly raise the cost of doing business, especially for smaller firms.
As a result, Europe’s work force is not working up to its potential. Tens of millions of workers get stuck in jobs that do not produce optimally, and tens of millions of others get stuck in unemployment. One symptom of this is low labor productivity, which the Breugel Forum notes in its report about Europe’s labor productivity:
Since 2007, the EU15 has taken a productivity holiday, while productivity has increased rapidly in the US (Figure 3). In terms of total factor productivity, both the EU15 and EU12 lag behind Japan. Even economically stronger countries, such as Germany, lag behind the US, and the evolution in the United Kingdom does not differ markedly from that of continental economies. Some hard-hit countries, such as Ireland, Spain and Latvia, have apparently recorded outstanding labour productivity performances since 2007, but most of these gains have been due to compositional changes, such as the shrinkage of low-productivity construction and low value-added services, and the total factor productivity developments in these countries were weak.
By making it excessively costly for businesses to downsize in tough times, Europe’s governments cause a phenomenon called “labor hoarding”, the effects of which the Breugel Forum report explain well:
Labour hoarding can partly explain the initial response to the shock of the recession. Employment contracted by five percent between 2007 and 2010 in the US, while in several European countries the employment shock was of limited magnitude. Public policies, such as Kurzarbeit, a scheme financed by the German government to support part-time work and keep workers employed, were one factor behind this response. Firms also hoarded labour, expecting a rebound and thereby limiting the initial rise in unemployment. Five years on, however, the productivity setback has become permanent, contributing to lower potential output. This cannot be regarded as a cyclical phenomenon anymore. In the short run, weak productivity performance can be related to insufficient demand through the so-called productivity cycle. But the weak cyclical position of the economy cannot explain sustained poor productivity.
It is good that some Europeans with access to the “big stage” are beginning to look deeper into what is really happening to the deeply troubled European economy. However, so long as they do not realize that the welfare state is the root cause of the problems, they will not be able to prescribe a medicine that could actually cure the patient.
The lack of insight into Europe’s ailment will drive the continent straight into the economic wasteland. As tepid as the American recovery is, it offers an infinitely better platform for the future than what the Old World could ever come up with.
The notorious French hate tax on high incomes was supposed to prevent the Greek-Portuguese-Spanish economic disaster from sneaking across the borders into the Land of Cheap Wine and Unreliable Cars. By confiscating most of what high income earners make, the new socialist government thought it would create some kind of economic recovery.
That, of course, did not happen. If anything, the French economy is destined for an even deeper recession than the one it has been stuck in over the past few years. This time, though, there are going to be fewer high-productive, job-creating people around to alleviate the downturn. In addition to the tax emigration by celebrities such as Gerard Depardieu, Brigitte Bardot and former president Sarkozy, many high-earning French professionals are moving to London, where they will soon enough be able to mark their own Frenchtown on the map.
The French Prime Minister, Jean-Marc Ayrault, has called these taxpatriates “greedy”, not stopping to think for a moment who is really greedy here – the people who worked to earn the money or the people who use brute force to take most of that money. But Mr. Ayrault is up against a strong opponent – the desire among human beings to reap the harvests of their own hard work. And there are few places where that desire is more prevalent than in sports, which spells trouble for Mr. Ayrault. Bloomberg reports that the hate tax will hit high-earning soccer stars in the French professional league:
Paris St. Germain, France’s richest soccer club, will have more on its agenda than controlling Lionel Messi when it takes on Barcelona, the world’s best team, tonight. PSG’s Qatari owners also have the tax man to think about. After conflicting messages by government officials, Prime Minister Jean-Marc Ayrault’s office issued a statement today confirming that a 75 percent surcharge on salaries above 1 million euros ($1.3 million) will apply to soccer clubs. At least 12 members of Paris Saint-Germain make more than 1 million a year, according to France Football magazine.
And that is just one club.
“This new tax will cost first-division teams 82 million euros,” France’s Football League said in a statement. “With these crazy labor costs, France will lose its best players, our clubs will see their competitiveness in Europe decline, and the government will lose its best taxpayers.”
I cannot help but wonder how many of these soccer players have leftist political sympathies. At least one of the highest-paid players in France, Swedish native Zlatan Ibrahimovic, has on occasion declared strong sympathies for socialist policies. This is usually the case with sports stars – they tend to be a little bit like Hollywood celebrities, with lots of money and conventional, superficial wisdoms to share when it comes to politics.
That aside, it remains to be seen whether or not this tax will survive both the erosion of its tax base and the legal challenges that are apparently still going:
President Francois Hollande made the 75-percent tax a cornerstone of his successful presidential campaign last year, saying the wealthiest had to make a special contribution toward cutting France’s deficit. … A first attempt to put the tax into law was shot down by the constitutional court last December because the tax applied to individuals and not households. While the government then said it would rewrite the tax for 2014, the country’s top administrative court said any rate above 66 percent could be rejected as confiscatory.
Now that’s interesting. How do they determine when a tax is confiscatory – and when it is not? As far as common sense and Locke-based natural-rights theory goes, any tax is confiscatory that does not go toward paying for the minimal state’s functions: the protection of life, liberty and property.
From an economic viewpoint there is no absolute cut-off point where a tax switches from being neutral to being a burden on productive economic activity. The negative effect starts kicking in with the first cent of taxes, but as taxes go up the private sector copes and adapts and continues to function. However, the higher taxes get the more the private sector has to spend on adapting and accommodating. Eventually, the net effect is a steady decline in economic activity and prosperity.
Preliminary numbers that I have yet to publish show that this point lies somewhere around 38-40 percent in taxes on GDP. This does not mean that taxes, up to that point, are free from negative influences on the private sector. But it means that so long as taxes remain below those numbers, the private sector can still survive given its accommodations costs on top of the taxes.
France has since long past the 40-percent marker and its on a path to slow but inevitable decline. The 75-percent hate tax is going to do one thing only, namely to speed up that decline.
It is beginning to dawn on the European political elite that their superstate project, their welfare state and their currency union are on a runaway train heading for disaster. Media is beginning to pick up on that as well. Here is a nice summary by Benjamin Fox at the EU Observer:
February 22 was a black Friday wherever you were in Europe. The morning brought the publication of dismal economic data to the effect that the eurozone will remain in recession in 2013.
Only a statistical illiterate would have thought otherwise.
Then, at 10pm Brussels time as the the markets closed, ratings agency Moody’s quietly issued a statement stripping the UK of its AAA credit rating. For those lulled into a false sense of security through a recent combination of relatively benign financial markets and the euro strengthening against sterling and the yen, it was a rude awakening.
That surge was due mainly to one thing: the commitment by the European Central Bank to print an infinite amount of euros to back its worst-rated treasury bonds. That commitment told global investors that “you can get seven percent return on Spanish treasury bonds and always get your investment back from us – come Hell or High Water!” Of course the euro is going to experience a temporary surge under such ridiculous, and totally unsustainable conditions.
EU Observer again:
Reading the European Commission’s Winter Forecast is a singularly dispiriting experience. The bald figures are that the eurozone is expected to remain in recession with a 0.3 percent contraction in 2013. The words “sluggish … weak … vulnerable … modest … fragile’” litter the 140 pages of charts and analysis.
Some examples of GDP growth numbers from the Forecast: Britain +0.9 percent in 2013; Austria +0.7 percent; Germany +0.5 percent; France +0.1 percent; Netherlands -0.6 percent; Italy -1.0 percent; Spain -1.4 percent; Portugal -1.9 percent; Greece -4.4 percent.
There are a couple of exceptions with slightly higher growth rates, primarily Sweden and Poland. Both economies are heavily dependent on exports and compete increasingly for the same low-paying manufacturing jobs. Due to a better working labor market and a more friendly tax environment my bet is Poland will eke out a victory in that competition, which would further depress the Swedish growth number.
That aside, there is a lot to be seriously worried about in the Commission’s Winter Forecast numbers. The overall standstill in GDP is very worrying, as 2013 represents the fifth year of a crisis that was originally relatively manageable but which has been made far worse by disastrous austerity measures. Since the Eurocracy – both political and administrative – remains committed to austerity, it is basically impossible to find any scenario that would allow Europe’s troubled economies to pull out of this endless recession.
I have warned about this before, and I recently drew the conclusion that Europe is in a state of permanent decline and that this permanent decline involves a drastic reduction in the standard of living for young Europeans – their prosperity is, so to speak, on hold. I also recently explained that Europe now represents what we could define as industrial poverty, that it is becoming an economic wasteland plagued by high unemployment, a static standard of living and overall lost opportunities for everyone except a small, political elite that – thus far – can live high on the hog in the Eurocratic ivory tower.
Perhaps I should take joy in the fact that my analysis has been spot on all the way. But that would be cynical, and I am not prone to either cynicism or schadenfreude. I am sincerely angered by what big government has done to Europe, and I fear that the only way out of this situation is a political Balkanization of the entire continent. That means a disorderly fragmentation, with outlier countries being ruled by fascists or stalinists (In Greece, both are about the same influential size in parliament) and panic forcing a return to national currencies under great financial and fiscal turmoil.
I would of course like to see Europe make an orderly retreat from the EU project, and I wholeheartedly support Euroskeptic heroes like Nigel Farage in fighting to secure that orderly retreat. However, as things look right now I predict that the economic crisis that is sweeping like a bonfire across Europe will burn down the better of the European economy before Mr. Farage and his fellow Euroskeptics gain enough momentum to put out that fire with free-market reforms and structural reductions to Europe’s enormous government.
Unfortunately, there is a lot to back up that last prediction. One example: the Greek economy is going to contract by another 4.4 percent in 2013. The Greek have already lost one quarter of their GDP since the crisis began in 2009. This is nothing short of economic free-fall, a recession that has escalated into full-scale depression, fueled by the destructive forces of austerity.
Back to Benjamin Fox in the EU Observer:
Spain’s budget deficit has cleared 10 percent. The average eurozone country now has a debt to GDP ratio of 95 percent – a figure that observers had previously thought was applicable only to Italy and Greece.
Those observers thought austerity would improve economic conditions in the countries where it is applied. It does not, it never has and it never will.
Mr. Fox then notes that the crisis is spreading beyond its “origin”, Greece:
While the Greek economy will contract by a further 4.4 percent this year – by the end of 2013 Greek economic output will have fallen by more than a quarter in five years – the clear indication from the Winter Forecast is that Athens is no longer in the eye of the storm. Paris and Madrid now have that unwanted place. France was one of a handful of countries called out for censure by commissioner Rehn on Friday. The French budget deficit remains stubbornly high, falling by a mere 0.6 percent to 4.6 percent in 2012. The commission’s projections have it remaining above the 3 percent threshold in 2013 and 2014. Ominously, Rehn told reporters that the commission would prepare a full report on France’s public spending after Paris prepares its next budget plan, adding that President Francois Hollande’s government needs to “pursue structural reforms alongside a consolidation programme.”
The Eurocrats may get away with destroying 25 percent of the Greek economy. But before they set out to do the same to France, they should consider the law of big numbers. France is the second largest euro-zone economy. If you destroy one quarter of that economy, you will accelerate the current European crisis from a looming depression into something that could even be more devastating than the Great Depression.
Mr. Rehn and his Eurocrat cohorts are not playing with fire. They are playing with a macroeconomic Hiroshima.
Benjamin Fox at the EU Observer does not quite seem to get the magnitude of the problems he is reporting, but that does not take away from his reporting them:
Some of the figures that leap off the pages of the Spanish assessment are truly alarming. Spain’s budget deficit actually increased to 10.2 percent in 2012, although the data does not include the savings from spending cuts and tax rises at national and regional level in the final weeks of the year, estimated to be worth 3.2 percent. Even then, the country will still have averaged a 10 percent deficit over the last four years. By the end of 2014, its debt pile will have nearly doubled to 101 percent of GDP over the space of five years.
Well, the good old Keynesian multiplier will tell you that if you contract government spending by 3.2 percent of GDP in that short of a time period, you can expect the private sector to contract by at least as much over the next 4-6 quarters. However, a recent IMF study showed that the multiplier works faster for reductions in government spending than for any type of increase in macroeconomic activity. Therefore, the negative repercussions of these Spanish austerity measures could begin to make themselves known in the Spanish economy already in the first quarter of this year.
Such a contraction in private-sector activity will erode the tax base and increase demand for tax-paid entitlements. As a result, the deficit will bounce back up again and probably exhibit a net increase.
In other words, what Mr. Fox sees as a mysterious persistence in deficits is really a logical consequence of the economic policies of the Spanish central and regional governments.
One of the many social disasters that will characterize the permanent European decline is very high, very costly unemployment. Mr. Fox notes this:
The headline rate of 11.7 percent unemployment across the eurozone is bad enough, but it is the sharp rise in long-term joblessness that is most concerning. Forty five percent of the EU’s unemployed have been out of work for more than a year, and in eight countries this figure rises to over one in two. In Spain, Greece and Portugal, where the unemployment rate is above 15 percent and youth unemployment sits close to one in two…
That’s 50 percent youth unemployment. Consider what that means for the loyalty of the young toward their country – and its political, economic and cultural leaders.
…millions of Europeans risk being locked out of the labour market for good. In the foreword to the Winter Forecast, Marco Buti, head of the commission’s economics department, rightly acknowledges the “grave social consequences” resulting from the unemployment crisis. But it is more dangerous than that. As the commission paper concedes “long-term unemployment is associated with lower employability of job seekers and a lower sensitivity of the labour market to economic upturns.” The longer people are out of work, the more likely it is that high unemployment rates become a structural feature of the European economy.
Not to mention their proneness to support extremist political parties. Support for Golden Dawn, the Greek Nazis, does not come solely from the police and the military.
I am sometimes asked what I think Europe can do about this crisis. I have tossed and turned that question around, and I am sad to say that my answer is very short: “very little”. That said, here are some desperate measures that could at least give Europe a chance:
1. Fiscal cease-fire. Stop with the austerity measures right now.
2. Labor-market deregulation. Most of Europe suffers from very rigid hire-and-fire laws. Give Europe’s employers a chance to take on new workers without having to make a de facto life-time commitment to them.
3. Flatten the tax structure. One of Europe’s most discouraging features is the steep marginal income taxes. Give job creators a chance to keep more of their money.
4. Orderly EU retreat. Let the Euroskeptics design a plan to dismantle the entire EU project and liberate the nation states – and, most important of all, their peoples – from this authoritarian, growth-stifling, freedom-eating bureauacracy.
5. Bye, bye to the welfare state. Europe needs a long-term plan – unique to each country – to get rid of its entitlement-based welfare state. Some ideas for America can perhaps be of inspiration for Europe as well.
These are, again, some very short points. I do not see fertile ground for either of them at this point, let alone for a more elaborate plan. However, there may still be hope to save individual countries, such as Britain, if right-minded political leaders can gain more influence.
But even if Britain and a couple of other countries escape the fury of the current crisis, the political, economic and social landscape of Europe will look very different in five years than it does today. And it won’t be for the better of Europe’s suffering masses.
Watching Europe trying to get out of its recession is like watching a man trying to ride a bike in zero gravity. No matter how hard they try to pedal forward, they are completely and utterly stuck in one and the same spot. That GDP growth spurt that was going to jolt the European economy back to life is turning into little more than a fairy tale. In fact, reality is going in the exact opposite direction. From the EU Observer:
The eurozone economy will shrink by a further 0.3 percent in 2013, the European Commission said Friday (22 February), revising down a more optimistic previous estimate that had predicted 0.1 percent growth for this year. The data also indicates that average government debt rose by 5 percent in 2012 to 93.1 percent as a proportion of GDP. The average debt level is expected to peak at 95.2 percent in 2014, well above the 60 percent threshold set out in the bloc’s Stability and Growth Pact.
Please note that the growth rate is adjusted down by 0.4 percentage points, a relatively large adjustment for such a short period of time. The reason is probably not faulty economic models, as the EC gets its data from their own statistics bureau, Eurostat. It is more likely that the reason has to do with political meddling with the non-formal forecasting process – or, to be blunt: politicians and bureaucrats have written in their own delusional beliefs in the virtues of austerity into a forecast that otherwise would show the naked truth about said austerity.
As for the 60 percent debt level, it is entirely artificial without the slightest scientific foundation. It was imposed on the EU by a group of politicians and bureaucrats who designed the Stability and Growth Pact and wanted to look fiscally conservative. The 60-percent level was one of two arbitrary features of the Pact, the other being the requirement that EU member states cap their deficits to three percent of GDP. This latter feature is, by the way, the main culprit behind the panic-driven austerity assaults on the budgets in, e.g., Greece, Spain, Italy and Portugal. Needless to say, that has made it even harder for the member states to meet the goals of the Stability and Growth Pact.
Back to the EU Observer:
News on government budgetary positions was more positive. The average deficit in the eurozone had fallen by 1.5 percent to 3.5 percent, with the commission expecting a further 0.75 percent improvement to bring the eurozone average under the 3 percent threshold. Announcing the figures, Economic Affairs Commissioner Olli Rehn admitted that “the hard data is still very disappointing” adding that the progress made by national governments to cut budget deficits was “not yet feeding into the real economy.”
Yes they are. They are just not feeding in like Mr. Rehn thinks they should. Instead of making the economy grow, which is Mr. Rehn’s delusional belief, his spending cuts and tax increases are perpetuating and even aggravating the recession.
As for the improvement on the budget deficit front, it is an expected, temporary effect resulting from last year’s spending cuts and tax increases. Things will turn for the worse again once the latest austerity round proliferates through the economy.
To get the full story of what it is Mr. Rehn does not get, download this paper and check out Figure 3 on page 15. Given how obvious these macroeconomic mechanisms are, it is very surprising that Eurocrats like Mr. Rehn are still getting away with their austerity fantasies.
Or maybe they are not. Perhaps things have gotten so bad in so many countries now that people are prepared to throw out the balanced-budget requirements in order to allow for prosperity to start growing again. The Italian election will give us a big hint, explains another story from the EU Observer:
Italian voters are heading to the polls on Sunday and Monday (24-25 February) in a closely-watched race that could bring the country back to the brink of a bailout. Outgoing Prime Minister Mario Monti, a respected former EU commissioner and economics professor, may be the favourite among EU leaders watching from the side lines, but at home, he appears to have failed to convince voters that his reforms and sober politics are what the country needs today.
It is hardly a sign of sobriety when someone recommends higher taxes and spending cuts in the midst of a recession.
In a significant catch-up effort – thanks to his media empire and promises to pay back taxes introduced by Monti – former leader Silvio Berlusconi was just five percent behind [center-left candidate] Bersani in the 8 February survey. … For its part, Italy’s leading investment bank, Mediobanca, has predicted that if Berlusconi wins, the country would face an immediate backlash on financial markets and could be forced to ask for financial assistance from the European Central Bank.
For what reason? Berlusconi would in all likelihood abandon the austerity policies, and if he follows through on its promises to not only reverse the tax cuts but do it retroactively, he will in fact inject a stimulus into the economy of a kind that could get the Italian economy growing again. That in turn would ease the budget pressure and increase confidence among investors in, e.g., Italian treasury bonds.
If, on the other hand, Bersani wins he might form an alliance with Monti to please the Eurocrats. That in turn would increase the likelihood of more austerity hammering down on the Italian economy. Given its size, that will have clearly negative effects on the economy of the euro zone.
As will the continuing commitment to austerity in France, where the socialist government has been forced to adjust its budget deficit forecast. From the increasingly influential pan-European news site The Local:
The figure for this year, when France was due to get back within the EU’s ceiling of 3.0 percent of output, is worse than the 3.5 percent previously tipped, and leaves Socialist President Francois Hollande looking for special leeway from Brussels. European Union Economy and Euro Commissioner Olli Rehn told a press conference that France could be given more time to meet its commitments, much as Spain and others have been over the three years of the debt crisis. “If the expected negative economic headwinds bring significant, unfavourable consequences for public finances, the (EU’s) Stability and Growth Pact allows for the deadline (for France) to be pushed back to 2014,” he said.
This is not very surprising, given that the French government has been forced to acknowledge that the nation’s economy will not grow as fast as they had suggested it would. This concession is hardly surprising, given the harsh fiscal measures that President Hollande and his fellow socialists in the National Assembly have imposed on the French economy.
In fact, the situation is beginning to look a bit panicky in Paris. Another story from The Local:
France needs an extra €6 billion in revenues next year, the budget minister said on Monday, and the European Central Bank said it had to act fast to cut spending and retain credibility after slashing the 2013 growth forecast. … Budget Minister Jerome Cahuzac … did not specify how this would be achieved saying taxes “are already very high in France.”
Really…? Does that mean that even socialists acknowledge that a 75-percent hate tax on high incomes is a bad idea? Or is 76 percent the “very high” limit?
Regardless of whether the French want to have stupidly high taxes or very stupidly high taxes, the pressure is on them to keep the austerity pressure on the economy. The Local again:
French ministries have been informed how much to cut spending in order for the government to generate €2 billion in savings this year. “Economies in public spending are inevitable,” Cahuzac said. “We have started to do it, we will continue to do it,” he added. Benoît Coeure, a Frenchman who sits on the managing board of the European Central Bank, said on Monday that Paris had to take strong action to convince its European Union partners that it was serious about keeping to the EU’s deficit norms.
Surprisingly, in the midst of all this, President Hollande does not want more austerity…
arguing they would only slow growth and further aggravate the country’s finances.
But a 75-percent hate tax on the “rich” does not slow growth, right? Regardless, it seems like the French government is now forced to walk a thin rope. On the one hand, budget minister Coeure says that:
“As for credibility on the short-term, France must absolutely respect its commitment to cut the structural deficit,” … “In the medium-term, it has to take quick and concrete decisions to achieve spending cuts, so that France reassures its European partners,” he said.
On the other hand we have president Hollande’s realization that austerity might not be such a good idea after all. What to do? Well, the Eurocracy is going to maintain its pressure on Hollande and the French government, especially now that Mr. Rehn has made clear that he believes the crisis is basically over and Europe has austerity to thank for it. He is not going to let go of his story that easily, which means he will keep Hollande in check and force him to “pet the horse” as the Danes say, i.e., do as he is told.
If at the same time the Eurocrats’ favorites form the next administration in Italy, the forces of austerity will continue to prevail. Under their boot, Europe will solidly establish itself as an economic wasteland, mired in industrial poverty. The balanced budgets will shine their glory over rusting steel mills, crumbling hospitals and the masses of the unemployed.
Just as the Eurocrats thought they had managed to talk down the euro crisis and save their beloved currency union, a little Danish boy steps out of the crowd and points out that the emperor still has no clothes. From Bloomberg.com (via Zerohedge):
Lars Seier Christensen, co-chief executive officer of Danish bank Saxo Bank A/S, said the euro’s recent rally is illusory and the shared currency is set to fail because the continent hasn’t supported it with a fiscal union.
I spent six years in Denmark. Danes are serious professionals, they are upfront, free-spirited and they have no problem speaking the truth. Culturally, When you hear this from a man in this position within the private sector in Denmark, you better listen.
“The whole thing is doomed,” Christensen said yesterday in an interview at the bank’s Dubai office. “Right now we’re in one of those fake solutions where people think that the problem is contained or being addressed, which it isn’t at all.”
Exactly. The main reason why the euro appears to be stable at this point is that the European Central Bank has put a cooler on the bonfire-like debt crisis by promising to buy any euro-denominated treasury bond, anywhere, any time. Technically, the promise was limited to the most troubled eurozone countries, but by implication it extends to all member states.
This uncapped promise has allowed international investors to go back into high-yield euro-denominated treasuries from primarily Greece, Portugal, Spain and Italy. Secondarily, they can also invest with similar confidence in French treasuries, which are next on the troubled-bonds list. Thereby the ECB removed a major reason for investor flight out of the euro, temporarily strengthened the currency and created the false impression that the crisis is over.
It is not. Bloomberg.com again, which paints a picture of declining GDP and a new phase in the debt crisis:
The European Central Bank forecasts the euro-area economy will shrink 0.3 percent this year … [and while] the euro has strengthened, the economies of Germany, France and Italy all shrank more than estimated in the fourth quarter. Ministers from the 17-member euro area met during the week to discuss aid to Cyprus and Greece as a tightening election contest in Italy and a political scandal in Spain threaten to reignite the region’s debt crisis.
Greece has suffered from a shrinking GDP for years now. Since the recession-turned-depression started they have lost roughly a quarter of their economy. That is extreme, but it shows the devastating consequences of combining austerity with an entirely artificial currency union. Furthermore, it should be a warning sign to the Eurocrats as well as other member states to not adopt the same kind of fiscal policy in their countries. Yet that is precisely what seems to be in the making: the “aid” to Cyprus and – again – to Greece will consist of a buyout of treasury bonds combined with austerity requirements.
There can be only one outcome: more of the same crisis.
As Bloomberg.com continues, it illustrates the dire situation of the European economy, a situation that according to Danish banker Christensen is going to be the undoing of the euro:
France is grappling with shrinking investment, job cuts by companies such as Renault SA and pressure from European partners to speed budget cuts. While Germany expanded 0.7 percent last year…
That’s a pathetic “growth” rate for an economy like the German.
…France posted no growth and Italy probably contracted more than 2 percent, the weakest in the euro area after Greece and Portugal, according to the European Commission. The economy is on the brink of its third recession in four years and the highest joblessness since 1998. Prime Minister Jean-Marc Ayrault said Feb. 13 the country won’t make its budget-deficit target of 3 percent of gross domestic product this year as the economy fails to generate growth and taxes.
The pursuit of a balanced budget is the enemy of growth. So long as the political leaders of Europe’s big welfare states do not want to concede that their countries can no longer afford their big, onerous, sloth-encouraging entitlement programs, there will be no change in the course of the European economy. The welfare states will continue to drive up deficits and drive down growth. The EU will continue to demand austerity, which will further drive down growth and widen the deficit gaps in government budgets. Europe will stagger and stumble, but there is no chance it will ever recover under its current big, redistributive goernment.
In a nutshell, all you Europeans: this is as good as it gets.
And just to add some more salt in Europe’s self-inflicted wounds, Bloomberg. com tops off with a stark reminder of the economic reality the Europe is stuck in:
“People have been dramatically underestimating the problems the French are going to get from this. Once the French get into a full- scale crisis, it’s over. Even the Germans cannot pay for that one and probably will not.” … Spain, which plans to sell three- and nine-month bills tomorrow and bonds maturing in 2015, 2019 and 2023 on Feb. 21, faces a sixth year of slump. Output is forecast to contract for a second year in 2013 with unemployment at 27 percent amid the deepest budget cuts in the nation’s democratic history. Public-sector debt is at record levels, having more than doubled from 40 percent of gross domestic product in 2008. The European Commission, which is due to update its forecasts this week, sees it rising to 97.1 percent of GDP next year.
This is the crisis that the ECB is trying to cover with an endless monetary commitment to defend the euro. But the deficits do not go away, and economic growth does not return. In its desperate fight to save the euro and the welfare state, Europe’s political leaders will bleed the former dry and deplete the latter of any money to honor its entitlement commitments.
I stand by my verdict: Europe is in permanent decline, it is turning itself into an economic wasteland of industrial poverty that over time will be left behind by North America and Asia.
The vastly unsuccessful French hate tax has driven scores of highly productive French professionals and entrepreneurs into financial diaspora. As things look right now, the French government can be happy of the 75-percent marginal income tax bracket does not lead to a net loss of revenue.
You would expect politicians in other countries to pay close attention to what the French are doing – and learn. However, since the advocates of hate taxes on high-income earners are socialists almost by definition, it would be illogical to expect them to take a logical look at the consequences of hate-taxing the rich. To them, the confiscatory principle behind the tax is an ideological motivator that has nothing to do with economic results.
There is, however, a large segment of people in the middle of the political spectrum who are not ideologically married to hate taxes, who are open to economic arguments but who may be swayed in favor of such taxes just because they are concerned about the government’s budget. Those people are the make-or-breakers of already highly taxed economies: on the one hand, a hate tax will break the back of the last segment of productive citizens; on the other hand, avoiding the hate tax opens for reforms that can actually improve an economy and put it back on its right track again.
Unfortunately, it seems as though the French hate tax initiative could have planted the seed of a global trend. South Africa is considering following in the French footsteps, and there are now voices in Britain in favor of similar policies. From the Daily Express:
Calvin Coolidge, the far-sighted American President of the 1920s, once said that “collecting more taxes than is absolutely necessary is legalised robbery.” Tragically, his wise words appear to have been lost on our political class, whose members spend much of their time dreaming up new ways to grab our cash. As the appetite of the state machine becomes ever more ravenous, so the tax system grows ever more oppressive. Now the Liberal Democrats want to expand the scope of this confiscatory regime even further.
The British Liberal Democrat party has long claimed that its reason to exist is that British politics needs a strong middle-of-the-road party, a compromise between conservative Tories and social-democrat Labor. That has changed over time, of course, as the Tories have drifted in toward the middle and the Liberal Democrats have become an increasingly clone-like copy of the main stream of the Labor party.
Nevertheless, it is noteworthy that this is the party that now proposes a hate tax. It verifies the theory that there is a critical mass in the center of politics that can be swayed by socialists into supporting anti-rich taxation, typically in the name of fiscal responsibility.
QED, as the Daily Express reports:
A plan drawn up by the party’s Federal Policy Committee proposes a wide-ranging new so-called “wealth tax”, targeted at anyone with assets estimated to be worth more than £2 million in total. The sum would include not just property but all possessions, including shares, paintings, jewellery, cars, and furniture, on which the owners have probably already paid tax.
Imagine the bureaucracy needed to assess the values of all these various kinds of property. Of course, the Liberal Democrats have already thought of this, as they suggest that “tax inspectors would be given unprecedented new powers to go into homes and check the valuations of personal effects.” So much for personal integrity, something European liberals typically claim to be staunch supporters of.
Daily Express again:
This is not the first time the Lib Dems, always eager to differentiate themselves from the Tories, have demanded an attack on the affluent. The party has long been wedded to the idea of a “mansion tax”, focused on houses worth more than £2million, while last autumn the Deputy Prime Minister [Liberal Democrat] Nick Clegg urged the introduction of “an emergency wealth tax on Britain’s richest” as part of the “economic war” against the deficit.
Just wait for that term to make it Stateside. It almost sounds like the campaign slogan of an Andrew Cuomo or a Martin O’Malley running for the Democrat ticket in 2016. Especially Governor O’Malley would be ready to validate virtually any tax policy under the guise of a “war against the deficit”. During his tenure as chief executive of Maryland, O’Malley has raised a tax on average every ten weeks.
Back to Britain, where the Daily Express makes a formidable point about hate taxes:
Enthusiasts for this sort of aggressive taxation like to pretend that only the very richest will be hit. But the lesson from history is that, once a new tax is established, ever larger numbers are sucked within its destructive embrace. That is certainly true of the upper rate of income tax. Only 30 years ago, just 3 per cent of taxpayers fell into this category. Now, through the cynical process of failing to raise thresholds in line with inflation, more than 15 per cent of earners are upper rate taxpayers. Soon, more than five million people, including ordinary middle- class people, will be paying income tax at 40 per cent. The same is true of so many other taxes, such as inheritance duties, which were once aimed at the only the wealthiest but now catch huge swathes of the population in their net.
Americans should take note and remember the Alternative Minimum Tax. The problems caused by the AMT will be absolutely nothing compared to what a “war on the deficit” and its hate-the-rich taxes would do to our economy.
The Daily Express concludes, aptly:
If state control and hatred of the rich really worked, then North Korea would be the most prosperous nation on earth, not a land of misery.
This is a very important point – there is no better place in the world to study the contrast between statism and capitalism than on the Korean peninsula. We should not have to go to such extremes to explain why statism does not work, but on the other hand, if friends of freedom do not take the incrementalist strategy of the left seriously, the only question remaining to answer is how small the difference will be between our society and North Korea before the left is satisfied.
That, in turn, is like asking an American liberal or a European social democrat: when is government big enough? So far I have not heard even a shred of an answer to that question. What I do hear, though, is a cacophony of new ideas for how to expand government, ideas that are produced increasingly by mainstream “moderates” in European as well as American politics.
The fact that hate taxes on the “rich” are back in vogue, despite their abysmal failure in the ’70s, is a testament to how uninterested in reality statists are. It is also a testament to the seductive power of socialist rhetoric, in particular in bad economic times. It is easy to tell someone who is just out of school and has no opportunities on the job market that “the rich took the money you never had and ran with it”. If wrapped in slick rhetoric and sold with the right kind of ad campaign, this kind of hateful politics can easily win the day.
It is the responsibility of every friend of liberty to fight the growth of government, to resist the advancement of hate taxes – and to offer a credible, reliable and realistic path to limited government.
France is the second biggest economy in the euro zone. Its new president and overwhelmingly socialist parliamentary majority have vowed to get the stuck-in-the-mud economy up and running again. Their first and foremost instrument is to spend even more money on government programs that have thus far wasted billions of euros without doing anything but harm to the economy. Their second brilliant idea is to punish job-creating small business owners with a hate-the-rich tax.
All of this is now going into effect, with a result that should surprise no one except a devout socialist. Expatica.com has the story:
French Foreign Minister Laurent Fabius said on Wednesday that France was unlikely to achieve its target of reducing its public deficit to 3.0 percent of output this year.
If you spend more and drive taxpayers out of the country it is unlikely that you will be able to balance the government budget. Fabius should know this. He was president Mitterrand’s finance minister back in the ’80s. Then again, he’s remained a socialist though all these years…
Later, Finance Minister Pierre Moscovici signalled that France might revise is targets for growth of 0.8 percent, and for reducing the public deficit to less than 3.0 percent of output this year. Saying that the targets were being held for the moment, Moscovici said after a cabinet meeting that the situation was difficult and that “if necessary we are able to have another look, to re-examine the different targets” for growth and for reduction of the public deficit.
It is likely that France will now return to the same austerity policies as they have tried before, which has not only depressed the economy but also inflicted serious damage on the French health care system. As for now, they are scrambling, with striking desperation, for tax revenues to replace what they are not getting from high-income earners escaping to Belgium and Britain. But as the Expatica.com article explains, there is mounting pressure on Paris to reverse course on spending, from a combination of higher taxes and higher spending to a combination of higher taxes and lower spending:
At Deutsche Bank, analyst Gilles Moec commented: “Two statements today by government heavyweights suggest that the target is soon to be ‘re-assessed’. “At the same time, we think the government will try to keep the market and its European partners on its side by announcing in more concrete terms how spending cuts and not just tax hikes will participate to the fiscal consolidation.” On Tuesday, the independent French public accounts court warned that the estimates behind the target for reducing the public deficit were not realistic and that the government had to focus much harder on cutting expenditure.
In other words, the same policies that have driven Greece into what is likely to become a decade-long depression. With that prospect in mind, and recognizing the size of the French economy as share of the euro zone GDP, no one should be surprised at the transformation of Europe from the epitome of prosperity to an economic wasteland, mired in industrial poverty and left behind by America, Asia and history.
Happy New Year, Mr. Hollande, president of the comfort-addicted frogs. Your hate-the-rich tax hit a stumbling block:
French president Francois Hollande suffered a major political blow over the weekend when his flagship policy to heavily tax the very rich was struck down. The Constitutional Council on Saturday (29 December) ruled that the tax – 75 percent for those earning over one million euros a year – was unconstitutional because it taxed individuals rather than households.
This is a minor, technical detail. I am not an expert on tax law, but it seems inconceivable to me that this tax would die as a result of this ruling. I cannot imagine that the French socialists who now run that snail-frying reservation would be unable to find a legislative way to get what they want anyway, especially since this tax is basically just a stupid political ploy:
The tax featured during Hollande’s presidential campaign in spring and was one of the first pieces of legislation to be worked on when he came to office. But although the predicted revenue from the levy was small, the outfall was loud. Several rich French citizens – among them actor Gerard Depardieu – said they would move abroad, most notably to neighbouring Belgium. Hollande’s government has played down the council’s ruling and said it would look at ways to re-table the tax in 2013.
Because taxing the rich is more important than getting the economy back on track again:
The law formed part of Hollande’s plan to bring the country’s budget deficit below three percent of GDP in 2013, required by EU rules and important for its overall relations with fiscally austere Germany.
Not a chance. Higher taxes have never generated more growth. The best France can hope for with tax hikes and more irresponsible government spending is to limp along at basically zero growth. But that does not stop the socialists. They still want “to find” 30 billion euros:
French Socialist President Francois Hollande has outlined a two-year plan to overhaul the country’s stagnating economy and to boost employment. The President conceded the task ahead to stimulate growth and restore public finances would be formidable, but promised in a live TV address on Sunday (9 September) to achieve results by 2014. “My mission is a recovery plan and the timeframe is two years,” he said.
For the past decade the French economy has grown at about one percent per year on average, adjusted for inflation. It should not be very hard to elevate GDP growth above that number, but President Hollande’s policy package is probably the only way you can assure to fall short of the past decade’s average.
The country’s hope of 1.2 percent growth for 2013 was recently dashed as figures indicated the economy will probably expand by just 0.8 percent next year. With unemployment passing 10 percent for the first time since 2002 and increasing, the French leader tried to persuade the public that an increase in taxes would help lower the budget deficit to 3 percent of GDP in 2013.
There is one reason, and one reason only, why that unemployment figure is not higher. The French government is filled to the brim with indolent bureaucrats. If the public-to-private employee ratio in France had been at American levels, unemployment figures would probably have been closer to 14 percent.
“Thirty billion [euros] must be found,” said Hollande. He added that all the ministries, with the exception of education, security and justice, would have to reduce their costs by a total of €10 billion. Companies will contribute an additional €10 billion in taxes, with the remaining €10 billion levied on households. He also reaffirmed a new 75 percent tax on people earning more than €1 million a year, reportedly causing a stir among some of France’s wealthiest.
Like the Terminator, the hate-the-rich tax can be heard pledging, in a garbled voice: “I’ll be back!” As we all know, driving the most productive citizens abroad is going to help create billions of jobs in France. Absolutely. Definitely. No doubt for sure.
Besides, the fundamentals that have driven the French economy in the ditch won’t change a bit under the new socialist regime:
France’s economy has failed to expand in the past three quarters and just over 3 million people are now unemployed. In August, troubled car-maker Peugeot Citroen announced it would cut some 8,000 jobs in the country, with labour unions threatening widespread strikes if the government does not intervene.
I could say something about the deplorable quality of French cars, but let’s just note that the French still believe that more government is the proper response to problems created by more government. But if government could create prosperity, then how come South Korea is sending food and medicine to North Korea and not the other way around?
The crisis in Europe is by no means a regular recession. This is a lasting, structural crisis that is fundamentally transforming the continent. What was once a global magnet of prosperity, hope, freedom and civilization is now becoming an economic wasteland of industrial poverty and second-tier living. The new policies in France are adding insult to the economic injuries caused by widespread austerity across the EU, thus reinforcing the downward spiral.
The rest of the world – especially the United States, Canada and Australia – better pay attention. We can still make different, better choices. Thankfully, at least here in the U.S., it looks like we are going to avoid the most destructive copycatting of Europe’s fiscal harakiri strategy.
But we can’t afford a single mistake.
In a recent essay, Eugenics and the Welfare State, I explained how the welfare state is resurrecting one of the ugliest, most reprehensible policies of the Third Reich: that of discarding human life based on a higher, common-good style value.
In Nazi Germany that “higher value” was Volksgesundheit, or, in raw, English terms, the pursuit of a pure, Aryan race. Lives that were considered unworthy of the race were disposed of – killed – under the superficial label of lebensunwertes leben, a life unworthy of living.
In the modern welfare state the “higher value” is fiscal responsibility, or the relentless pursuit of a balanced budget. By the logics of macroeconomics, a welfare state can never keep all the promises it makes to people (in the form of entitlements) whereupon it needs to contain its costs. Inevitably, that cost containment will hit the socialized, single-payer health care system, where as I explained in my essay people will be disposed of because their lives do not fit the budget under fiscal responsibility. Lebensunwertes leben has become haushaltsunwertes leben, a life unworthy of the budget.
Today we can report on two more examples of how governments, in the pursuit of cost containment, reduces human life to an accounting statistic. First, an article from France24:
Belgium is considering a significant change to its decade-old euthanasia law that would allow minors and Alzheimer’s sufferers to seek permission to die. The proposed changes to the law were submitted to parliament Tuesday by the Socialist party and are likely to be approved by other parties, although no date has yet been put forward for a parliamentary debate. The draft legislation calls for “the law to be extended to minors if they are capable of discernment or affected by an incurable illness or suffering that we cannot alleviate.”
Minors. Children, in other words. There is a reason why children are considered minors. They are for the most part not capable of making decisions regarding major aspects of, e.g., their health. So either a custodian will have to make the decision, or they will be open to a doctor telling them how miserable their life is going to be.
France 24 again:
Belgium was the second country in the world after the Netherlands to legalise euthanasia in 2002 but it applies only to people over the age of 18. Socialist Senator Philippe Mahoux, who helped draft the proposed changes, said there had been cases of adolescents who “had the capacity to decide” their future. He said parliamentarians would also consider extended mercy-killing to people suffering from Alzheiner’s-type illnesses.
Already back when I was a college undergraduate 25 years ago, euthanasia was becoming a hot topic in the discipline of medical ethics. Its rise to prominence among scholars coincided with a surge in budget cuts in Europe’s single-payer health care systems. The point was that specialists in ethics would advise politicians and bureaucrats within the government-run health care system on how to prioritize with increasingly limited resources.
What has happened instead is that the medical ethics profession has become enablers of policy practices that reduce the status of human life to a utility function. This is how economists tend to see it – something I will never forgive my profession for – and it looks like the “wrong kind” of economists are winning the debate. Rather than creating strategies for how to dismantle the welfare state, most economists concerned with public policy lend their expertise to a government that wants to preserve its big presence in the economy and in our lives. By necessity, therefore, my fellow economists have to devise prioritization strategies within existing government programs.
In health care, that means applying QALYs, one of the most immoral inventions of the economics profession. The more I see of the modern state of medical ethics, the more I suspect that they have simply allowed themselves to be seduced by the perceived science behind QALY.
As a result, the profession of medical ethics appears to have surrendered to big, tax-funded, government-run health care bureaucracies. These bureaucracies demand ethical and economic validation of their own desire to continue to exist as monopolies on providing health care. Socialists, of course, support this monopoly, and they support whatever they have to do to preserve that monopoly. That means, e.g., making explicit their view of the individual vs. government. If the individual does not match the government’s template for how life should be lived – often times that template is a budget template – then the individual should be discarded.
This is why Belgian socialists support euthanasia for children, and it is also why the socialists who now run France are pushing in the same direction:
A government-commissioned report released on Tuesday has recommended that France allow doctors to “accelerate death” for terminally-ill patients who want to end their lives. French people overwhelmingly support medically-assisted suicide, with an October poll showing 89% in favour.
Until the budget hatchet is taking aim at their neck.
Examining the case for medically-assisted suicide was a campaign pledge made by French President François Hollande ahead of his election in May 2012. Hollande pledged to act on the recommendations of the government-commissioned report, which will be referred to a national council on medical ethics that will examine the precise circumstances under which doctors can assist in ending a patient’s life.
And there you go again. Medical ethicists give in to the perceived need to reduce individuals to utility functions in a socialized health care system.
Draft legislation could be produced in France as early as June 2013. “The existing legislation does not meet the legitimate concerns expressed by people who are gravely and incurably ill,” Hollande told reporters on Tuesday, referring to a 2005 law that allows doctors to “leave patients to die”.
Just like they do in Britain, where doctors leave children to spend a week, ten days, even more, to die an agonizing death from starvation and dehydration.
What is so disturbing in this France24 story is that physicians – who unlike medical ethicists have sworn an oath to save lives at every turn – are lending themselves, their reputation and their authority to this reprehensible practice of having government decide whose life is haushaltsunwertes leben and whose life is not:
The new report was produced by senior medical professor Doctor Didier Sicard, who was scathing of doctors’ reluctance to apply existing laws. Sicard said that most of the terminally ill patients and their families he had interviewed were dissatisfied with the medical profession, accusing them of having a “cure at all costs” culture that was “deaf to the psychological distress of patients and of their wishes”. He said he favoured amending the 2005 law to broaden the circumstances in which doctors can help the terminally ill die, while stressing that he did not support any legislation that would “suddenly and prematurely end life” and that he “radically opposed inscribing euthanasia into law”.
So exactly how does Dr. Sicard want patients to die, then, in the loving care of the government-run health care system? If euthanasia – the active “assistance” to die – is ruled out, then the only alternative is passive assistance. Which again means starving and dehydrating someone to death.
How is that practice any more in accord with the Hippcratic Oath than to actively kill someone?
The difference between euthanasia and death by dehydration is eclectic flea killing within the confinements of an authoritarian welfare state. And that authoritarian welfare state is tightening its grip on Europe. The discussion about life and death in welfare states like England, Belgium and France – but also Denmark, Sweden and other supposedly compassionate European countries – has shifted from saving as many lives as ever possible and curing as many medical conditions as ever possible, to seeking the path of least pain to cutting the cost of health care.
Least pain for politicians and bureaucrats, of course.
Once governments have established laws and regulations on who shall die, when, in order to save money for government, then it is easy to introduce similar laws and regulations to regulate whose baby shall be aborted, when.
And as with all laws and regulations infringing on our individual freedom, they will of course have to be “revised” from time to time.